If the Supply Curve Is Perfectly Inelastic and the Demand

question 46

Multiple Choice

If the supply curve is perfectly inelastic and the demand curve is a downward sloping straight line,what is the effect of a consumer ad valorem tax on equilibrium price and quantity?

• A) Price remains unchanged and quantity increases.
• B) Price decreases and quantity increases.
• C) Price decreases and quantity remains unchanged.
• D) Price and quantity decrease.

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Definitions:

Dividend Growth Rate

Dividend Growth Rate is the annualized percentage rate of growth of a company's dividend payments, indicating the steady increase in dividends paid out to shareholders over time.

External Equity

Financing obtained from sources outside a company, such as public stock offerings or venture capital investments.

Flotation Cost

Flotation cost is the total charges associated with creating and issuing new shares of stock, encompassing underwriting, legal, and registration fees.

Equity Capital

Funds raised by a company in exchange for shares of ownership, representing the value of shareholders' equity.